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Recommended Cash Offer By Sky Holdings Limited



Click here for the full offer document (pdf)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

RECOMMENDED CASH OFFER

by

SKY HOLDINGS LIMITED

a wholly-owned subsidiary of

BRITISH SKY BROADCASTING GROUP PLC

for

365 MEDIA GROUP PLC

Summary

  • The Boards of Sky Holdings and 365 Media are pleased to announce today that they have agreed the terms of a recommended cash offer, to be made by Sky Holdings, a wholly-owned subsidiary of Sky, for the entire issued and to be issued share capital of 365 Media.

  • The Offer is 68 pence in cash for each 365 Media Share, valuing the entire issued share capital of 365 Media at approximately £96 million and the fully diluted share capital of 365 Media at approximately £103 million.

  • The Offer represents a premium of approximately:

    - 23 per cent. to the Closing Price of 55.5 pence for each 365 Media Share on 4 October 2006, the last dealing day prior to the commencement of the offer period

    - 6 per cent. to the Closing Price of 64 pence for each 365 Media Share on 14 December 2006, the last dealing day prior to the date of this announcement.

  • As an alternative to all or some of the cash consideration of 68 pence per 365 Media Share, holders of 365 Media Shares (other than Restricted Overseas Persons) who validly accept the Offer may elect to receive Loan Notes on the basis of £1 nominal of Loan Notes for every £1 cash consideration.

    The 365 Media Directors, who have been so advised by UBS, consider the terms of the Offer to be fair and reasonable. In providing advice to the 365 Media Directors, UBS has taken into account the commercial assessments of the 365 Media Directors. Accordingly, the Board of 365 Media intends to unanimously recommend that 365 Media Shareholders accept the Offer, as the 365 Media Directors have irrevocably undertaken to do (or procure to be done) in respect of their own beneficial interests and holdings.

    Sky Holdings has received irrevocable undertakings to accept the Offer from the 365 Media Directors and certain other 365 Media Shareholders in respect of, in aggregate, 43,497,498 shares in 365 Media, representing approximately 30.7 per cent. of the issued share capital of 365 Media. Further details of the irrevocable undertakings are set out in Appendix II.

    The acquisition of 365 Media enhances Sky's existing online strategy, adding to its portfolio of online assets and increasing its exposure to high growth revenue streams. The acquisition of 365 Media will bring Sky:

  • an extensive portfolio of websites, including TEAMtalk.com, SportingLife.com, Planet-Rugby.com, PlanetF1.com, Football365.com, Golf365.com, Rivals.net and Cricket365.com. These sites cover a wide range of sports and their differentiated style and branding makes them complementary to Sky Sports' existing websites. 365 Media's websites have:

    - over 9 million monthly users

    - user bases and brands developed over several years

    - a strong community element which Sky believes represents an area of significant opportunity

    - mobile distribution deals for content which support Sky's multi-platform approach to delivery

  • greater presence in the UK's online sector, leading to improved exposure to the astest growing segment of the UK's advertising market; according to the Internet Advertising Bureau, UK online advertising revenue grew by 40 per cent. in the first six months of 2006

  • a broader platform to promote Sky's gaming and betting activities as well as Sky's other sports related offerings

  • over 60,000 additional betting and gaming customers

  • a profitable business, which recorded a 16 per cent. year on year increase in gross profit for the six months ended 30 June 2006

  • a positive net cash balance; 365 Media reported net funds of £12 million as at 30 June 2006.

    The acquisition by Sky of 365 Media is expected to result in significant synergies relative to current profitability of the 365 Media business, including marketing efficiencies and the consolidation of supply arrangements for sports news. In consequence, the acquisition is currently expected to:

  • immediately enhance earnings before integration costs

  • be neutral to earnings after integration costs in the financial year to 30 June 2007

  • generate returns at a rate in excess of Sky's cost of capital within three years (post tax and integration costs)

  • deliver an internal rate of return in excess of 20 per cent.

    The Offer Document and Form of Acceptance are being posted today to 365 Media Shareholders (and, for information only, to 365 Media Optionholders), although the Offer is not being made, directly or indirectly, in or into the United States, Canada, Australia or Japan. Copies of the Offer Document and the Form of Acceptance are available from Lloyds TSB Registrars at 3rd Floor, Princess House, 1 Suffolk Lane, London EC4R 0AX and from Lazard at 50 Stratton Street, London W1J 8LL.

    Commenting on the Offer, Sky's Chief Financial Officer, Jeremy Darroch, said:

    'The acquisition of 365 Media will contribute to Sky's aim of being a leading provider of online sports and gaming services. Bringing together 365 Media's extensive network of sports and gaming websites with our own Sky Sports and SkyBet businesses will allow us to reach a broader audience. This will give us greater presence in online advertising and will position us to take full advantage of growing opportunities in gaming. This combination moves forward our strategy of serving customers with high quality content and services across multiple platforms.'

    Commenting on the Offer, 365 Media's Executive Chairman, Peter Dubens, said:

    'Since the admission of 365 Media to AIM in August 2001, we have created a significant player in sports websites and online gaming. We acquired extremely good online brands in the aftermath of the dotcom crash, including websites such as Planet-Rugby.com, Football365.com, SportingLife.com, TEAMtalk.com and Cricket365.com and an odds comparison website (Oddschecker.com). We are now one of the largest online sports networks in Europe, attracting over 9 million discerning and dedicated sports fans per month to our network of websites.

    Through a strategy of acquisitions combined with organic growth, the market capitalisation of the business has increased from £7.55 million on our admission to AIM in August 2001 to £96 million at the Offer Price and I believe this Offer recognises the value of the company which has been carefully and prudently created in the last five years.'

    Commenting on the Offer, 365 Media's Chief Executive Officer, Eric Semel, said:
    '365 Media has grown from a small online sports book into a substantial online
    presence across Europe, with a broad reach of online gaming and betting products together with a network of leading online sports brands. I would like to thank all the staff who have contributed to creating the company as it now stands, without whom it would not have been possible.'

    ENQUIRIES

    Sky

    Analysts / Investors:
    Andrew Griffith
    Robert Kingston
    +44 (0)20 7705 3000

    Press:
    Robert Fraser
    +44 (0)20 7705 3000

    Lazard & Co., Limited (Financial Adviser to Sky)
    Peter Warner
    Sarah Carter
    +44 (0)20 7187 2000

    Merrill Lynch International (Broker to Sky)
    Mark Astaire
    Peter Brown
    +44 (0)20 7628 1000

    Finsbury
    Alice Macandrew
    Guy Lamming
    +44 (0)20 7251 3801

    365 Media
    Peter Dubens
    Executive Chairman
    +44 (0)20 7766 6909

    UBS Investment Bank (Financial Adviser to 365 Media)
    Jason Katz
    Jonathan Evans
    +44 (0)20 7567 8000

    Financial Dynamics
    Edward Bridges/Juliet Clarke/Hannah Sloane
    +44 (0)20 7831 3113

    This summary should be read in conjunction with, and is subject to, the full
    text of this announcement. Terms used in this summary shall have the meaning
    given to them in the full announcement.

    The conditions to which the Offer is subject are set out in Appendix I to this
    announcement. Appendix III to this announcement contains definitions of certain expressions used in this announcement.

    For further information on Sky and 365 Media, please see www.sky.com and
    www.365mediagroup.co.uk, respectively.